Author Archives: Orsi Peter

Raul Castro Says Economic Reforms Are Working

Posted on December 14, 2012 by Arch Ritter
By By PETER ORSI Associated Press
HAVANA December 13, 2012 (AP)

President Raul Castro, December 13, 2012

 President Raul Castro declared Thursday that Cuba’s two-year experiment with market reforms is working and has the wind at its back, but said much work remains to breathe life into the sputtering economy.

In a speech devoid of any new policy announcements, the military khaki-clad leader sounded a generally positive tone in discussing the Marxist country’s progress, though he conceded that the island faces a “colossal psychological barrier” in shedding old habits and “concepts of the past.”

“The updating of the Cuban economic model … marches with a sure step and is beginning to delve into questions of greater reach, complexity and depth,” Castro said, according to an official transcript of his remarks before lawmakers at the second of their twice-annual sessions.

The proceedings were closed to foreign journalists, but state television later broadcast tape-delayed highlights.

Cuban economy czar Marino Murillo told the assembly that the government is planning more measures to support and increase the ranks of independent workers and small business owners.

Real estate broker, delivery person, antiques dealer and produce vendor will all be newly legalized private jobs in a country where the government has long dominated the economy and employed nearly the entire workforce.

The self-employed “are gaining space,” Murillo was quoted as saying by the Cuban news agency Prensa Latina.

Economists have said Cuba needs to expand the number of allowable private enterprises, with an emphasis on white-collar work. Real estate has been a particular concern. Cuba legalized the buying and selling of property 12 months ago, but has yet to allow agents to facilitate transactions.

Some 400,000 people now work in the private sector in 180 legally approved job areas, Prensa Latina said. That’s up from 156,000 in late 2010, the onset of Castro’s five-year plan to reform the economy with a dash of free-market activity.

Cuba intends to keep control of key sectors, however, and Castro and other top officials insist the country is not abandoning a half-century of socialism for freewheeling capitalism.

Murillo also said that in the future, state-run businesses including tourism concerns will be paying independent contractors via bank transactions in hard currency.

Meanwhile, lawmakers passed a 2013 budget with a deficit of 3.6 percent of GDP and heard an update on the country’s economy.

The government announced recently that GDP rose 3.1 percent this year, below expectations of 3.4 percent. Growth of 3.7 percent is forecast for 2013, low for a small developing economy, but Castro called it “acceptable in a scenario of continuing global economic crisis.”

Economy Minister Adel Izquierdo said the construction sector is expected to expand 20 percent in the coming year, worker productivity should rise 2.6 percent and the country has a goal of topping 3 million tourist visits for the first time, according to Prensa Latina.

In its first order of business, the assembly unanimously passed a resolution of support for Venezuelan President Hugo Chavez, who earlier this week underwent his fourth cancer-related surgery in the Cuban capital.

Chavez is a key ally of Cuba, and during his presidency Venezuela has sent billions of dollars’ worth of oil to the island on preferential terms.

“At this crucial hour for Venezuela … we will be like always,” Castro said, “together with President Chavez and the Bolivarian Revolution he leads.”

The unicameral parliament will reconvene in February with a new membership following elections and is then expected to name Castro to another five-year term.

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Cuba oil dreams on hold as drill rig set to depart

Posted on November 14, 2012 by Arch Ritter

By Peter Orsi,  November 13, 2012; Associated Press,

Original Article here:  Cuba oil dreams on hold

Scarabeo 9

The only rig in existence that can drill in deep waters off Cuba is preparing to sail away from the island, officials said Tuesday, after the third exploratory well sunk this year proved nonviable in a blow to government hopes of an oil bonanza.

While production was always years off even in the event of a big discovery, analysts said the Scarabeo-9′s imminent departure means Havana’s dreams of injecting petrodollars into a struggling economy will be on hold indefinitely.

“Bottom line: This chapter is finished. Close the book, put it on the shelf,” said Jorge Pinon, a Latin America oil expert at the University of Texas’ Center for International Energy and Environmental Policy. “But do not discard. Maybe there is a good ending to this story … someday.”

Geological surveys indicate that between 5 billion and 9 billion barrels of oil may lie in deep waters off Cuban shores, but finding it has turned out to be trickier than officials hoped.

The Scarabeo-9, a 380-foot-long (115-meter), semisubmersible behemoth that leases out for prices approaching a half-million dollars a day, steamed all the way from Asia at tremendous cost to arrive in Cuba in January. That was the only way companies could avoid sanctions under Washington’s 50-year-old embargo against Cuba. The Scarabeo is the only rig of its kind built with less than 10 percent American parts — an extreme rarity in an industry where U.S. technologies play a major role.

An exploratory well sunk early this year by Spanish company Repsol turned out to be commercially nonviable. After Repsol declined an option to try again, the Scarabeo passed to a group led by Malaysia’s Petronas, which drilled its own dud. Cuban officials announced Nov. 2 that Venezuela’s PDVSA had also missed the mark.

For this baseball-mad nation, it was strike three. Cuba’s Ministry of Basic Industry, which oversees oil matters, confirmed Tuesday that the rig is on its way out, with no word on when it might return.

“The Scarabeo-9 will leave Cuba soon,” it said in a brief statement emailed to The Associated Press.

It referred questions about the platform’s destination to owner Saipem of Italy. Saipem’s parent company Eni declined to comment, but various reports have had it bound for Africa or Brazil.

Oil’s existence off Cuba is not in doubt. Russian company Zarubezhneft is contracted to use a different rig to drill in shallower waters off Cayo Coco, a key Cuban tourist destination, later this month. But the more promising deposits lie in the deep waters of the west.

The only way to get at them is to bring back the Scarabeo or build an entirely new rig, and the three failed holes plus the ongoing hassle of avoiding sanctions from the U.S. embargo will likely make companies think twice.

Pinon noted that the Repsol and Petronas wells were not dry holes, only that exploiting the oil there was not currently commercially viable due to the structure of the ocean floor and the porosity of the rock.

“If oil continues at over $100 and if the industry continues to learn and develop new technologies, they could probably come back to Cuba … and go for a second round,” he said.

Cuban drilling in the Gulf of Mexico had raised fears in the United States that a big spill could slick U.S. shores from the Keys to the Carolinas. It also attracted heated criticism from anti-Castro exiles in Florida’s Cuban-American community.

“The (U.S.) administration must finally wake up and see the truth that an oil rich Castro regime is not in our interests,” Florida Rep. Ileana Ros-Lehtinen said in a recent statement.

Some cited Cuban oil exploration to argue for strengthening the embargo, which bans U.S. companies from doing business with Cuba and threatens sanctions against foreign firms if they don’t play by its rules. Others said it demonstrated the opposite: a need to ease the embargo so U.S. companies could more smoothly participate in disaster response to any spill.

Cuba has long campaigned for an end to the embargo, which remains in place despite 21 consecutive U.N. votes against it — most recently on Tuesday when the world’s nations voted 188-3 to condemn the sanctions.

Off-Shore Petroleum Exploration Concessions

On-Shore Petroleum Extraction Rigs, Matanzas, 1996, Photo by Arch Ritter

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Cuba economy czar says cooperatives by year-end

Posted on July 24, 2012 by Arch Ritter

By PETER ORSI Associated Press; July 23, 2012

HAVANA (AP) — Cuba’s economy czar said Monday that plans are in place to begin an experimental phase of non-state cooperatives in sectors ranging from food services to transportation by the end of the year.

While cooperative farming has already begun, Cubans have been waiting for regulations allowing them to form worker-owned co-ops in other sectors. The pilot program announced by Marino Murillo in a session of Cuba’s parliament will include 222 cooperatives.

The creation of midsize cooperatives is a long-promised lynchpin of President Raul Castro’s economic reforms, and Cuba’s economy czar promised state support to jump-start the pilot program. Murillo said some will be converted state-run enterprises, and co-ops will be given preference over private single-owner businesses.

“For these cooperatives and the non-state entities, in the coming year $100 million is being budgeted which is the financing necessary so they can be assured production, because if we create them and there is no financing, they won’t work,” Murillo told lawmakers in one of the parliament’s twice-a-year sessions.

He also reiterated that Cuba must also make its state-run enterprises more efficient and productive, since they will continue to dominate.

“The most important part of our economy will be the socialist state enterprise,” Murillo said. “Don’t think that all of a sudden the private-sector workers will generate $40 billion, $50 billion in GDP.”

Castro’s five-year plan to overhaul the economy has already legalized the sale of homes and cars and swelled the ranks of private-sector entrepreneurs by a quarter-million since 2010. Nearly all are small mom-and-pop shops, however, the likes of restaurants, cell-phone repair shops and jewelers.

Cuba insists that the reforms are not are not a wholesale embrace of capitalism but rather an “updating” of the nation’s socialist model, and most key sectors will remain under government control.

Other than a statute on taxation, no new laws were announced Monday. Foreign journalists were not allowed access to the session of the National Assembly, but state television aired Murillo’s speech in the evening. For islanders wondering whether the assembly would take action on long-promised reform of travel restrictions, it was another disappointment.

Early this year, Parliament President Ricardo Alarcon said in an interview that a “radical and profound” change to the rules, which keep most Cubans from leaving the country, was imminent.

There has been no word since then about scrapping the much-loathed “tarjeta blanca,” or “white card,” which islanders must apply for to travel abroad. Speaking to parliament, Castro repeated that the government still intends to reform the migratory rules, but did not say when it might happen. “It has not been relegated. On the contrary,” Castro said. “We have continued working toward its gradual relaxation, taking into account the associated side-effects.”

The pace of Castro’s reforms has slowed this year with no blockbuster changes announced since December, leading many economists to question whether Cuba can meet its own targets for reducing bloated state payrolls by 1 million workers, and shifting 40 percent of the economy into non-state control.

Last week, the island’s burgeoning small business class was dealt a blow with the low-key announcement of new, stiff tariffs on imported goods. The entrepreneurs say that without access to wholesale markets, the only way they can supply their businesses is through “mules” who transit between Cuba and places such as Miami, Ecuador and Panama with their bags stuffed with food, spices, clothing, electronics, diapers and other items tough to come by on the island.

On Monday, Cuban state media published an article seeking to quiet what it called the “numerous comments and anxieties” about the new customs duties. It made no mention of the small businesses, however, and insisted that the measures were necessary because excess baggage is slowing down service at the airport, making it resemble a cargo terminal.

Murillo said Monday that Cuba is studying how to establish wholesale markets, but did not announce specific plans.

Economists say it’s clear that Castro’s changes are here to stay, but change is happening slowly and measures to stimulate the private sector come with other decisions throwing up obstacles in entrepreneurs’ paths. “It’s very confusing because they are really sending mixed signals,” said Sergio Diaz-Briquets, a Cuba analyst based in the Washington area.

Castro also reiterated that the government will not be pressured into hurrying. “On a national level and above all in the exterior, there has been no lack of appeals, not always well-intentioned, to accelerate the pace of transformation,” Castro said. “It is a matter of such scope upon which the country’s socialist and independent future depends, that there will never be space for the siren calls that call us to immediately dismantle socialism and impose so-called shock therapies on the people.”

Cuba celebrates Revolution Day on Thursday. The date is sometimes used to make major announcements, though less so in recent years since Castro replaced his older brother Fidel as president.

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